Compensation Ratio Calculator Formula
Understand the math behind the compensation ratio calculator. Each variable explained with a worked example.
Formulas Used
Compa-Ratio
compa_ratio = range_midpoint > 0 ? (actual_salary / range_midpoint) * 100 : 0Gap to Midpoint
gap = actual_salary - range_midpointVariables
| Variable | Description | Default |
|---|---|---|
actual_salary | Actual Salary(USD) | 72000 |
range_midpoint | Salary Range Midpoint(USD) | 80000 |
How It Works
How to Calculate Compa-Ratio
Formula
Compa-Ratio = (Actual Salary / Range Midpoint) x 100
The compa-ratio (compensation ratio) tells you where an employee sits relative to the target pay for their role. A compa-ratio of 100% means they are paid exactly at midpoint. Below 100% means below midpoint (often newer employees or those with room to grow). Above 100% means above midpoint (often tenured high performers). Most organizations target 80-120% of midpoint as the acceptable range.
Worked Example
An employee earns $72,000 and the midpoint for their salary band is $80,000.
actual_salary = 72000range_midpoint = 80000
- 01Compa-Ratio = ($72,000 / $80,000) x 100 = 90%
- 02Gap to Midpoint = $72,000 - $80,000 = -$8,000
- 03The employee is paid 10% below the range midpoint.
Ready to run the numbers?
Open Compensation Ratio Calculator